Brent crude climbed above US$122 on Wednesday after China said it would boost energy imports this year while concerns persist over supply risks and Iran's nuclear program, despite the country's offer for talks with major powers.
China's trade ministry said the country plans to boost energy imports in 2012, and will keep policies to ensure stable export growth, which it expects to improve in the second half of the year.
Front-month Brent gained 51 cents to $US122.49 a barrel by 0501 GMT, after settling US$1.82 lower at US$121.98 in the previous session. U.S. oil increased by 61 cents to US$105.31 after settling US$2.02 lower at US$104.70.
"I think China's comments are a timely reminder that the Chinese and Asian economies are still growing strongly," said Ric Spooner, chief market analyst at CMC Markets. "Even though China's target growth rates are down for this year, it's still growing and that means more energy needs overall."
China cut its 2012 growth target to an eight-year low of 7.5 percent, in line with expectations, and made boosting consumer demand the year's first priority as it looks to wean the economy off its reliance on external demand and foreign capital.
Prices had fallen in the previous session after news that major powers accepted Iran's offer for more talks on its nuclear program eased concerns about supply disruptions.
But the risk premium on Iran is still being priced into the oil market and is unlikely to reduce further, analysts said.
"Iran has not disappeared. In my mind, they will probably stall for time.. and the issue will last for the rest of the year," said Tony Nunan, a risk manager at Mitsubishi Corp.
"Oil prices should be weaker in the second quarter but Iran and geopolitical risks are keeping the market supported."
Price gains were curbed by investor concerns that the global growth outlook was worsening and that Greece might not meet a looming debt-restructuring deadline.
Australia's resource-rich economy grew a slow 0.4 percent last quarter as business spending dipped from record highs while Brazil's economy expanded just 2.7 percent in 2011 as industries struggled with soaring business costs and an over-valued currency.
Greece turned up the heat on its creditors on Tuesday as it sought to secure a bond swap to cut its debt, while the main bondholders group warned a disorderly default would cause more than a trillion euros of damage to the euro zone.
Additional bearish reinforcement followed when the U.S. Energy Information (EIA) cut its world oil demand growth forecasts for both 2012 and 2013.
US crude oil inventories rose 4.6 million barrels last week, the industry group American Petroleum Institute said in a weekly report released late on Tuesday, far exceeding the expected rise.
But prices will continue to remain supported due to adequate demand from Asia, analysts said.
"There is an overall increase in demand for energy in the emerging markets which will more than compensate for the weakness in developed countries," said Spooner